GRUPO LALA REPORTS SECOND QUARTER 2015 RESULTS

Transcription

1 GRUPO LALA REPORTS SECOND QUARTER 2015 RESULTS Mexico City, July 28, 2015 Grupo LALA, S.A.B. de C.V., the Mexican Company focused on healthy and nutritious foods, ( LALA ) (BMV: LALAB), today reported results for the second quarter The following information has been presented based on International Financial Reporting Standards (IFRS) and in nominal terms. The following chart provides an abridged Income Statement, in millions of pesos. The margin for each figure represents its ratio to net sales and the percentage change from the quarter ended June 30, 2015, as compared with the same period in 2014: HIGHLIGHTS 8.0% increase in Net Sales reaching 11,847 million pesos 190 basis point EBITDA margin expansion closing at 14.1% 2nd. Q 14 % Sales 2nd. Q 15 % Sales Var. % Net Sales $ 10, % $ 11, % 8.0% Gross Profit 3, % 4, % 17.6% Operating Income 1, % 1, % 26.6% EBITDA (1) 1, % 1, % 24.9% Net Income (2) % % 18.6% (1) EBITDA is defined as operating income before depreciation and amortization. (2) Net Income refers to Consolidated Net Income. Message from Management Scot Rank, Grupo LALA s CEO, commented: Our plans to accelerate sales are on track and second quarter 2015 reflected the highest sales increase since the third quarter of This strong growth, combined with gross margin expansion, resulted in a very strong quarterly profit. He added: I am encouraged by our team s success in the second quarter and believe that we are laying the foundations to deliver strong results for the full year. 18.6% increase in Net Income (2) closing at 999 million pesos New production facility inaugurated in San Benito, Nicaragua, with an investment of approximately 50 million dollars New product launches and presentations within Nutri Leche brand. 1

2 5.5% 10,973 11,847 Earnings 2Q-2015 CONSOLIDATED RESULTS FOR THE SECOND QUARTER 2015 Second quarter 2015 net sales increased by 8.0% year on year; from 10,973 million pesos in the second quarter of 2014 to 11,847 million pesos for the same period of This increase is primarily due to organic growth resulting from commercial, pricing strategies and processes implemented over the past twelve months. Second quarter sales also increased due to the non-organic growth related to consolidation of the Eskimo, S.A. business into LALA s operations, which represented a 2.2 percentage point increase in net sales. Sales have been divided into three segments based on product type in order to better reflect LALA s product mix: Segment 2nd. Q 14 2nd. Q 15 Variation % Milk (3) 7,207 7, % Other Dairy Products (4) 3,107 3, % Beverages and Others (5) (1.0)% (3) Milk: Pasteurized, UHT and functional, pasteurized and UHT dairy-based beverages, and powdered milk. (4) Other Dairy Products: Cream, butter, cream-based spreads, yogurt, cheese, ice cream and desserts. (5) Beverages and Others: Beverages, tea, juices, cold cuts and other income. * Million pesos. Second quarter 2015 gross profit increased by 17.6%, or 703 million pesos, to reach 4,702 million pesos with a 39.7% gross margin, as compared to the 36.4% gross margin reported for the same period in This 3.3 percentage point gross margin improvement is due to the aforementioned pricing strategy, as well as to the following: a favorable product mix resulting from a higher percentage of value added products, conversion costs savings due to improved productivity, as well as strong control of raw material costs. This was partially offset by increases in certain raw materials costs due to the depreciation of the Mexican peso relative to the US dollar. Sales by Segments 30.0% Milk Net Sales (MXN$mm) 2Q '14 2Q ' % Other Dairy Products Beverages & Others Gross Margin of 39.7% 2

3 Earnings 2Q-2015 Operating expenses as a percentage of sales increased by 1.5 percentage points, from 26.6% in the second quarter of 2014 to 28.1% for the same period in This increase is primarily attributable to higher SG&A expenses related to residual non-recurrent effects associated with the Company s production capacity consolidation projects, as well as increased expenses to support one time process and capability projects. This increase is also due, to a lesser extent, to expenses related to transitioning Eskimo s assets and processes into LALA s operations. Second quarter 2015 operating income increased by 26.6%, or 290 million pesos, to reach 1,381 million pesos, as compared to 1,091 million pesos for the same period in This was primarily due to the 703 million pesos increase in gross profit, which was partially offset by a 404 million pesos increase in operating expenses and an 8 million pesos net decrease in other income/expenses. Second quarter 2015 EBITDA therefore increased by 24.9% to 1,672 million pesos, as compared to 1,339 million pesos for the same period in EBITDA margin increased by 190 basis points, from 12.2% in the second quarter of 2014 to 14.1% for the same period in Second quarter consolidated net income increased by 156 million pesos, reaching a total of 999 million pesos, as compared to 843 million pesos for the same period in This increase was due to the 290 million pesos increase in operating income and to the 5 million pesos increase in share of results of associated companies. This effect was partially offset by the 36 million pesos decrease in Net Financial Income and by the 103 million pesos increase in income taxes due to the increase in pre-tax profit. 26.6% Increase in Operating Income EBITDA (MXN$mm) MARGIN 12.2% 14.1% 2Q '14 2Q '15 Net income increased by 156 million pesos 3

4 NON-OPERATING RESULTS Net financial expenses (Income) Second quarter 2015 net financial income decreased by 36 million pesos, closing with a 69 million pesos profit as compared to the 105 million pesos profit for the same period of the previous year. This was due to the 29 million pesos exchange-related loss due to peso/dollar depreciation, as well as to the decrease of 16 million pesos in net interest income. This was partially offset by the favorable effect of 9 million pesos in the result from financial instruments, derived from the early termination of the forward currency contract to sell dollars held by the Company for hedging purposes. Tax on earnings The tax on earnings for the second quarter 2015 amounted to 456 million pesos; a 103 million pesos year on year increase, due to the 260 million pesos increase in pre-tax profit for the second quarter of Net interest income 61 million pesos Effective tax rate 31.3% NEW PRODUCTS Nutri Leche UHT 1.5lts UHT 1.5lts Nutri Leche 3pack UHT Nutri Yoghurt Spoonable 900gr Nutri Yoghurt Spoonable 120gr Yoghurt LALA Light 125gr Yoghurt LALA Light 125gr 4

5 FINANCIAL POSITION CAPEX For the six months ended June 30, 2015, the Company deployed 1,109 million pesos in CAPEX; 51% of which was directed towards property, plant and equipment investments, among others. The remaining 49% was for operative maintenance CAPEX. Cash, short-term investments and financial instruments Grupo LALA s cash, short-term investments and financial instruments decreased by 948 million pesos, from 8,862 million pesos at June 30, 2014 to 7,914 million pesos at June 30, This decrease is primarily due to LALA s acquisition of Eskimo S.A. and to capital investments made over the past twelve months, as well as to dividend payments. These effects were partially offset by the 3,467 million pesos in net cash from operations generated by the Company over the past twelve months. CAPEX 6M ,109 million pesos 7,914 million pesos Cash as of June 30, 2015 Accounts receivable Grupo LALA s accounts receivable balance increased by 557 million pesos, from 2,357 million pesos at June 30, 2014 to 2,914 million pesos at June 30, This is mainly attributable to increased sales in the modern trade channel and, to a lesser extent, to the consolidation of Eskimo's accounts receivables. Taxes and other accounts receivable Tax and other receivables increased by 1,248 million pesos, from 1,327 million pesos at June 30, 2014 to 2,575 million pesos at June 30, This increase is primarily attributable to the VAT balance, where last year the collection immediately followed our claim while this year the process is taking more time, as well as the VAT balance increase from the investments made over the past twelve months. To a lesser extent, the balance increase is due to the reclassification of assets and liabilities in accordance with applicable accounting standards. Intangible assets and other assets The 616 million pesos increase in intangible and other assets is primarily due to the acquisitions made over the past twelve months. New LALA Coffee with Milk presentation 1lt. 5

6 Taxes and other accounts payable Taxes and other accounts payable increased by 1,188 million pesos, from 1,322 million pesos at June 30, 2014 to 2,510 million pesos at June 30, This is primary due to the dividend the Company declared in February 2015, which has been partially paid in line with the release calendar, and, to a lesser extent, due to the reclassification of assets and liabilities in accordance with applicable accounting standards. Total debt At the end of the second quarter 2015, the Company s total debt decreased by 30 million pesos, closing at 66 million pesos, as compared with 96 million pesos reported at the end of the second quarter This decrease was due to debt payments made over the last twelve months. The Company s debt balance as of June 30, 2015 is related to financial leases required for the Company s successful operation. 66 million pesos in Total Debt as of 2Q-2015 Key financial data As of June 30, 2015, the Company's key financial ratios were as follows: Financial Metrics 2nd. Q 14 2nd. Q 15 EBITDA (1) / Interest Paid 59.4x 542.3x Net Debt / EBITDA (1) (1.6)x (1.3)x EV / EBITDA (1) 13.1x 11.9x Stock Market Indicators 2nd. Q 14 2nd. Q 15 Book Value per Share $7.51 $9.38 Shares Outstanding* 2, ,474.4 (1) EBITDA is defined as operating income before depreciation, amortization. (6) Shares used for Book Value ratio, are based on the weighting outstanding shares of the last twelve months. * Millions of shares at the end of each quarter. Book Value per Share $9.38 pesos 6

7 2Q-2015 Relevant Events May 18, 2015 Grupo LALA announced the payment associated with Coupon No. 4 of the dividend declared on February 16, Said payment was made on May 27, 2015 in the amount of $ Mexican pesos for each LALA share outstanding at the date of payment. May 11, Grupo LALA announced that the Company inaugurated the first phase of production for its new facility in San Benito, in the Tipitapa municipality of Nicaragua, with an investment of approximately 50 million dollars. The new production facility was constructed on 15 acres of land. During the initial phase of operation, the facility has been processing fresh milk and dairy products destined for the Nicaraguan market. Sell-side analyst coverage As of June 30, 2015, the Company is covered by the following twenty brokerage firms: J.P. Morgan, Morgan Stanley, BBVA Bancomer, Barclays, Citigroup, Goldman Sachs, Santander, Credit Suisse, UBS, Bank of America Merrill Lynch, Scotiabank, Vector Casa de Bolsa, GBM Grupo Bursátil Mexicano, Casa de Bolsa Ve por Más, INVEX Banco, Intercam, Actinver, Casa de Bolsa Interacciones, Banorte-Ixe and Punto Casa de Bolsa. Share buyback program As of June 30, 2015, the Company s share buyback program had a balance of 962,129 shares, at an average price of $28.15 for a total of 27 million pesos. About LALA Grupo LALA, (BMV: LALAB), Mexican company focused on healthy and nutritious foods, has a history of more than 65 years of experience in the production, innovation and marketing of milk and dairy products under the highest quality standards. The Company operates 18 production plants and 165 distribution centers in Mexico and Central America, supported by more than 32,500 employees. Grupo LALA's fleet of approximately 7,300 vehicles distributes its more than 600 products to nearly 500,000 points of sale. LALA s portfolio is led by its two main brands: LALA and Nutri Leche. For more information visit: CONFERENCE CALL Wednesday, July 29, 2015 at 11:00am ET / 10:00am Mexico City Time Led by: Scot Rank, Chief Executive Officer and Gabriel Fernández Chief Financial Officer To participate, please dial-in ten minutes ahead of the scheduled time. Mexico: United States: (Toll Free) International: Grupo LALA trades on the Mexican Stock Exchange under the ticker symbol LALA B This press release contains certain forward-looking statements about the Company s results and outlook. However, actual results may vary materially from these estimates. The information on future events contained in this press release should be read together with a summary of these risks, which are included in the Annual Report. That information, as well as future reports issued by the Company or any of its representatives, whether verbally or in writing, may vary materially from actual results. These projections and estimates, which were prepared with reference to a specific date, should not be considered as fact. The Company has no obligation whatsoever to update or revise any of these projections and estimates, whether as a result of new information, future events, or other associated events. 7

8 GRUPO LALA, S.A.B. DE C.V. CONSOLIDATED INCOME STATEMENT FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2015 (In thousands of nominal pesos) For the three months ended For the six months ended June 30, June 30, Net sales $ 10,972, % $ 11,846, % $ 22,080, % $ 23,477, % Cost of goods sold 6,973, % 7,145, % 14,079, % 14,243, % Gross profit 3,999, % 4,701, % 8,000, % 9,233, % Operating expenses 2,920, % 3,324, % 5,890, % 6,470, % Operating Income 1,090, % 1,380, % 2,154, % 2,746, % Net of financial (income) expenses Net of financial income (76,149) (0.7)% (60,579) (0.5)% (147,477) (0.7)% (117,095) (0.5)% Exchange rate (profit) loss (13,507) (0.1)% 15, % (15,506) (0.1)% 28, % Financial instruments (15,239) (0.1)% (24,311) (0.2)% (25,349) (0.1)% 17, % Financial income, net (104,895) (1.0)% (69,292) (0.6)% (188,332) (0.9)% (70,634) (0.3)% Share in the results of associated companies 0 0.0% 5, % 1, % 9, % Income before taxes 1,195, % 1,455, % 2,343, % 2,827, % Income tax expense 353, % 456, % 705, % 884, % Net consolidated income 842, % 999, % 1,638, % 1,942, % Non-controlling interest 10, % 9, % 16, % 19, % Equity holders of the parent $ 832, % $ 989, % $ 1,622, % $ 1,923, % Depreciation and amortization 247, % 291, % 488, % 566, % EBITDA $ 1,338, % $ 1,672, % $ 2,643, % $ 3,312, % 8

9 GRUPO LALA, S.A.B. DE C.V. CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT JUNE 30, 2014 AND 2015 (In thousands of nominal pesos) ASSETS As of June 30, 2014 As of June 30, 2015 Cash and cash equivalents $ 7,814,799 $ 6,513,958 Investments in financial instruments 1,046,826 1,400,478 Accounts receivable 2,357,422 2,914,614 Taxes and other accounts receivable 1,327,470 2,574,947 Related parties 74, ,496 Inventories 3,377,850 2,991,605 Prepaid expenses 354, ,933 Current assests 16,353,335 16,799,031 Investments in associates 40, ,196 Property, plant and equipment, net 10,619,712 12,901,363 Intangible and other assets 1,357,824 1,974,006 Deferred income tax 302, ,583 Non-current assets 12,321,164 15,242,148 Total assets $ 28,674,499 $ 32,041,179 LIABILITIES Short-term bank loans $ 30,180 $ 31,901 Suppliers 2,053,341 2,193,168 Related parties 1,250,296 1,158,907 Taxes and other accounts payable 1,321,596 2,509,885 Current liabilities 4,655,413 5,893,861 Long-term liabilities Long-term debt 65,453 33,552 Deferred income tax and other taxes payable 1,477,647 1,409,171 Other accounts payable 639, ,867 Long-term liabilities 2,182,386 2,165,590 Total liabilities 6,837,799 8,059,451 SHAREHOLDERS EQUITY Capital Stock 1,492,652 1,492,652 Net premium in share placement 13,691,891 13,690,728 Retained earnings 4,696,045 6,609,375 Income of the year 1,622,098 1,923,782 Equity attributable to equity holders of the parent 21,502,686 23,716,537 Non-controlling interest 334, ,191 Total shareholders equity 21,836,700 23,981,728 Total liabilities and shareholders equity $ 28,674,499 $ 32,041,

10 GRUPO LALA, S.A.B. DE C.V. CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2015 (In thousands of nominal pesos) Operating activities: Income before taxes from continuing operations $ 2,343,936 $ 2,827,178 Depreciation, amortization, and trademarks impairment 488, ,143 Changes in net financial expenses (income) (164,521) (99,532) Results from the sale of property, plant and equipment (7,441) 7,270 Other items 37,071 32,437 Total 2,697,788 3,333,496 Changes in operation assets and liabilities As of June 30, 2014 As of June 30, 2015 Accounts receivable 82,913 (223,323) Inventories (731,620) (206,034) Related parties 936, ,580 Suppliers (135,482) 68,537 Taxes, other accounts receivable and prepaid expenses (784,698) (1,070,784) Other assets and liabilities 204,078 29,438 Total (428,126) (640,586) Net cash flow provided by operating activities 2,269,662 2,692,910 Investing activities Acquisition of property, plant, equipment, and intangibles (1,312,854) (1,130,525) Proceeds from sale of property, plant, and equipment 22,861 18,588 Investments in Financial instruments (1,035,185) 374,502 Net cash flow used in investing activities (2,325,178) (737,435) Financing activities Net of loans and payment of loans from related parties 28,812 (4,083) Net of financing and payment of financing (640,413) (23,592) Repurchase of shares (5,936) (9,826) Dividends paid to equity holders of the parent 0 (631,285) Dividends paid to non-controlling interest 0 (29,676) Future exchange contracts collected 46,200 (163,850) Net cash flows provided (used) in financing activities $ (571,337) $ (862,312) For more information: Enrique González Casillas Investor Relations Tel: +52 (55) investor.relations@grupolala.com Net increase of cash and equivalents (626,853) 1,093,163 Adjustments to cash due to exchange rate fluctuations (400) 6,507 Cash and equivalents at beginning of the year 8,442,052 5,414,288 Cash and equivalents at the end of the year $ 7,814,799 $ 6,513,